Reverse Mortgage Group

If you are 62 years of age or older and are in need of urgent cash, the idea for applying reverse mortgage loan is a good option. You may find yourself in a situation when you need cash but cannot stand any more monthly loan payments. In these situations, you can turn a part of your home equity into cash money to fulfill other commitments.

The primary benefit for seniors is to make any monthly payments and be free from all financial burdens as a result of this type of loan. On the other hand, you have a burden to pay monthly payments from other types of loans and are worried that the lender can take your home if you fail to pay their monthly installments on time.

In addition, you will receive cash as a lump sum amount, monthly payments, credit line, or a combination of all these. You have the options available to you and you have the control over the disbursement method.

The Internet is a useful source of reliable service providers who can assist you the information you need about the pros and cons associated with a reverse mortgage loan. If this is a good option for you to pay-off your debts while being free of the financial liability, then you can start the application process for a reverse mortgage loan to secure your ownership.

Senior citizens are always afraid to apply for loans to maintain their lifestyle and way of living. They are always in fear that the lender will take away their home in return of the loan or they will be burdened with monthly loan payments. A new type of loan which is a senior reverse mortgage loan helps the seniors with cash money without taking their home. Senior reverse mortgage loan is also known as Home Equity Conversion Mortgage (HECM).

Hereunder are the top 5 factors which are considered for preferring reverse mortgage loan over any other type of loan for seniors:

1. The lender can’t take your home in return of the cash. So, this type of loan will not change the ownership of the home under any circumstances.
2. It is considered as the tax-free alternative in comparison to the other options which you have in order to obtain immediate cash.
3. The value of the home, HECM interest rate level and the age of the borrower have direct influence of the amount which a senior homeowner will get in return of this type of loan.
4. A senior doesn’t have to pay any monthly payments back to the lender. The amount is recovered by selling the home after he passes by or shifts to another place.
5. It is an obligatory insurance in which the capital, interests and other costs are recovered from the home selling price and rest of the amount is taken from the insurance. This means that the lender will get the entire amount and the borrower will never have to lose his other assets.

Seniors who don’t want to inherit their property to their children or relatives are a great fit for this type of loan. In addition, debt will not be incurred to those that inherit remaining assets. One can spend their golden years in peace and assurance.

Let’s face it. The current economic atmosphere is almost absent of 401(k) gains. The massive losses taken in the 401(k) arena is leaving senior homeowners struggling financially.

Home Equity Conversion Mortgages, or HECMs, have been around for over 20 years.

In those years, 637,000 have been granted and by July 2010, over 500,000 were still active. That is over 7 percent of the almost 7,000,000 owner-occupied homes that people age 65 and older are occupying (recorded by the U.S. Census Bureau survey in 2008). Approximately 99 percent of the reverse mortgage market is represented by HECMs. Each is insured by the Federal Housing Administration (FHA).

Rising Demand

Lower upfront costs for HECM borrowers and the need for additional income indicate that demand for HECMs will rise for the foreseeable future. As many borrowers prepare for decreased income, statistics show that most borrowers of HECM loans are 62 and 63 years old.

At the close of 2008, individuals between 55 and 64 years old showed a median value of $56,000 for 401(k)s/IRAs, 30% down from $78,000 by the close of 2007, states the Federal Reserve’s Survey of Consumer Finances

What’s New

HUD introduced the HECM Saver on October 4, 2010.  The HECM Saver deeply cuts the upfront costs for borrowers needing loans smaller than standard HECMs.  With a mortgage insurance premium of .01% (rather than the standard 2% of the loan value), the HECM Saver offers trade off in exchange for reducing the loan size.

HUD is also improving the counseling process by offering alternative benefits to HECM loans as well as hearing verification to ensure the borrower completely understands what is being discussed.

Investor demand for securitized pools of HECMs is increasing. This is leading to more competitive interest rates.  Lenders are also waiving upfront mortgage insurance premiums for fixed-rate mortgages.  At 2% of the first $200,000 of the home value plus 1% of the remainder (up to $6,000), the savings are dramatic.  Many lenders are also waiving origination fees, which can be 2% of the appraised value of the home.

Next Step

For a comprehensive analysis of your ability to qualify, contact our office today to speak with a professional HECM specialist. If you don’t qualify, or if a HECM is not right for you, we will be the first one to let you know. If you do qualify, we can help you achieve the best rates available.

Now that homes are upside down in the states of California, Florida, and Arizona, the regions hit hardest by the economic collapse, seniors are looking for ways to supplement their income to keep their home and memories.  Seniors that took out reverse mortgage loans before the recession began live in homes that are upside down, but their reverse mortgage amounts are still being honored.

86-year-old mother Florence took out a reverse mortgage on her home in Cape Coral, FL, in 2006. At the time, the home was appraised for $260,000 and she qualified for a $160,000 reverse mortgage guaranteed by FHA (Federal Housing Administration).

This loan, called a Home Equity Conversion Mortgage, or HECM for short, allows seniors 62 or older to borrow money against the equity in their home without making any monthly loan payments. Interest and annual insurance premiums are added to the loan principal.

The balance of the loan is to be paid back when the borrower dies, sells the house, or moves out within one year, but extensions are available.

Interesting fact: if the balance of the loan is somehow higher than the value of the home, the FHA insurance fund will cover the difference.  The borrower will not be held responsible for falling home values.

In October, 2010, Florence has a loan balance of about $75,000 and about $105,000 remaining in her line of credit, but the home value has fallen to about $80,000.

Now that the home value is lower than her available line of credit, the question is: does Florence get to keep the balance of the reverse mortgage line of credit?

The answer is yes.

“She can absolutely take out that $105,000,” says Susanna Montezemolo, a vice president with the Center for Responsible Lending.

“The lender must honor the mortgage contract as originally written,” says FHA spokesman Lemar Wooley. The amount of money she is entitled to from the line of credit will not change.

The declining home values have inspired change in policy and the 2011 budget approved by the Obama administration. The FHA announced that there will be changes to reduce risk and increase annual mortgage insurance premiums.

For more information about reverse mortgages or home equity conversion mortgages, contact us now.